Cost of Geothermal Power vs. Fossil Fuels

Scientific American has an article this week on the cost of geothermal power compared to coal and other fossil fuels. While the environmental benefits of using geothermal power and other renewable energies have been obvious, the price of generating electricity from fossil fuels have been much cheaper.

Thanks to the recently passed stimulus package, renewable energy production will get $28 billion US dollars in subsidies!

Combine a new U.S. president pushing a stimulus package that includes $28 billion in direct subsidies for renewable energy with another $13 billion for research and development, and the picture for renewable energyâ€”geothermal power among the optionsâ€”is brightening. The newest report, from international investment bank Credit Suisse, says geothermal power costs 3.6 cents per kilowatt-hour, versus 5.5 cents per kilowatt-hour for coal.

That does not mean companies are rushing to build geothermal plants: There are a number of assumptions in the geothermal figure. First, there are the tax incentives, which save about 1.9 cents per kilowatt-hour. Those won’t necessarily last forever, howeverâ€”although the stimulus bill extended them through 2013.
Second, the Credit Suisse analysis relied on what is called the “levelized [sic] cost of energy,” or the total cost to produce a given unit of energy. Embedded within this figure is an assumption that the money to build a new geothermal plant is available at reasonable interest ratesâ€”on the order of 8 percent.
In today’s economic climate, that just isn’t the case. “In general, there is financing out there for geothermal, but it’s difficult to get and it’s expensive,” Geothermal Energy Association director Karl Gawell told ScientificAmerican.com recently. “You have to have a really premium project to get even credit card interest rates.”